3 Reasons to Consider Dividend Kings for Your Retirement Account | personal financing

If you are looking for investments that can provide reliable income and have stood the test of time, look no further. Here are three reasons to consider Dividend Kings for your retirement account.

History in the stock market has shown us that uncertainty is the only certain thing; If you invest long enough, you will almost certainly face a downturn in the market. The Dividend Kings earned their title because they have been able to increase their annual dividend for at least 50 consecutive years. This means that in the past 50 years, these companies have weathered massive market downturns, multiple recessions, and other broader economic conditions that were not ideal.

When you invest in Dividend King, you can be pretty sure the company can weather tough times while at the same time managing to maintain dividends – which is not the case even for some of the most experienced companies. Takes Walt Disney And Delta Airlinesfor example, both suspended their dividends amid the COVID-19 pandemic.

Knowing that your investments will continue to pay dividends will definitely ease any anxiety you might have as stock prices fluctuate and fall.

With enough time and consistency, a good dividend portfolio can provide significant income in retirement. If you are able to save and invest in a fund that yields 8% annual returns (slightly less than the historical annual return of Standard & Poor’s 500), here’s roughly how much you would have collected in 30 years with different monthly subscription amounts:

Data source: author accounts.

If these amounts were invested in a fund with a 2.5% dividend yield, here’s how much they would pay out annually:

Data source: author accounts.

With these annual dividends, you receive monthly payments of over $2,800, $3,500, and $4,200, respectively. Even if these total numbers aren’t enough to sustain your current lifestyle in retirement, they are a worthwhile supplement to other sources of retirement income, such as a 401(k) or Social Security.

In general, how dividends are taxed depends on whether it is a qualifying dividend or an ordinary dividend. To be considered an eligible return, it must be one of the following:

• US corporation (or corporation in US possession).
• A foreign corporation qualifies for benefits under a US tax treaty.
• A foreign company that can be traded on a large US stock market.

Investors must also hold stock for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date. Qualified dividends are taxed positively at your capital gains tax rate, while ordinary dividends are taxed at your ordinary income tax rate.

Fortunately, if you buy these investments in a Roth IRA, you don’t have to worry about dividend taxes. Because you contribute after-tax money to a Roth IRA, you get tax-free withdrawals in retirement. Raising your money and exempting compound taxes can save you tens of thousands in taxes during your retirement.

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Stefon Walters has no position in any of the stocks mentioned. Motley Fool has positions at Walt Disney and recommends them. The Motley Fool recommends Delta Air Lines and recommends the following options: long January 2024 calls worth $145 on Walt Disney and short January 2024 calls worth $155 on Walt Disney. Motley Fool has a disclosure policy.